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Dear Mr John,
As at F9 and P4 there is simple rule that post-tax cash flows should be discounted by post-tax discount rate. The timing of tax payment affects our cash flows but does it affect the post-tax discount rate too? In a very extreme case, says, we have to pay tax 100 years later, in effect, it means virtually no tax, then the discount rate formula must somehow reflect this fact.
Thank you in advance!
# I have just known that you are having holidays. I will wait until you get back home! Have nice trips, Mr John!
Thank you for offering to wait 🙂
However, despite what you write being true in real life, in the exam we ignore the delay in the tax flows when calculating the post-tax discount rate.
Thank you Mr John,
Could you suggest some text books which discuss deeper about this matter, especially the effects of tax to discount rate and project appraisal? Maybe after completion of all exams, I would spend time to do research about this area of corporate finance.
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